Bitumen orders from India drying up

Vol 3, PW 19 (13 Oct 99) Midstream & Downstream

Importers of bitumen - the raw material used to make asphalt for roads - are getting used to the fact that India might no longer need to import the stuff.

The example of the Cyrus Group is a case in point. Cyrus is controlled by an Iranian American by the name of Hassan Rassouli.

It makes its money from selling bitumen sourced from Iran and claims 85% market share of the bitumen market in Oman - where it has an office in Muscat - and 65% market share in United Arab Emirates. In Oman the companys biggest competitor is Shell.

Cyrus exports on average 100,000 tonnes a year of Bitumen to India, mainly to the port of Vizag on the east coast and Mumbai on the west coast and occasionally to Kandla in Gujarat. These are the only ports in India capable of handling bitumen imports.

Business from India makes up approximately 10% of the groups turnover. Two months ago Cyrus was sole bidder for a bitumen tender issued by the state government of Maharashtra, which is presently engaged in a massive road and flyover building programme in Mumbai.

Only three bids were made for the tender. All three came from Cyrus.

At the last minute the Maharashtra government discovered it could source cheaper bitumen locally and cancelled the tender, leaving a very embittered Cyrus. India today produces on average 750,000 tonnes of bitumen per annum.

Like fuel oil, naphtha, and LSHS diesel, bitumen is a decontrolled product, which means its price is set by the market, not by government (See: 'Datawatch' below). With refinery capacity in India expected to soar, production of bitumen will increase, leading to sharp price falls.

Cyrus has been quick to understand: the company is cancelling plans to construct a bitumen handling import terminal on the West coast.